ACIT, CIRCLE-1(1), NEW DELHI V. A.R. ALLOYS PVT. LTD., NEW DELHI

ITA 9366/DEL/2019

AI Insights

The case involves cross appeals by the Assessee, M/s A.R. Alloys Pvt. Ltd., and the Revenue against the order of the CIT(A) which arose from the assessment order passed under section 144 of the Income Tax Act, 1961. The primary issues revolved around alleged unaccounted sales and discrepancies in the financial records of the Assessee's trading and manufacturing units. The Assessing Officer had made substantial additions to the Assessee's income based on these alleged unaccounted sales and discrepancies in reported yields and sales figures. However, the CIT(A) and subsequently the Tribunal found that many of these issues stemmed from typographical errors or were due to the method of accounting used by the Assessee, which did not necessarily indicate any intent to evade tax.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839166 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 05-12-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: P.D. MITTAL
• Keywords: Business income

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, F: NEW DELHI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No.- 9366/Del/2019 [Assessment Year: 2015-16] Assistant Commissioner of Income Tax, Circle 1(1), Room No. 159A, 1st Floor, I.P. Estate, New Delhi-2. Vs M/s A.R. Alloys Pvt. Ltd., C-45, Wazirpur, Industrial Area, New Delhi-110052. PAN- AADCA8990P Assessee Revenue ITA No.- 9399/Del/2019 [Assessment Year: 2015-16] M/s A.R. Alloys Pvt. Ltd., C-45, Wazirpur, Industrial Area, New Delhi-110052. Vs A.O., Circle-1(1), New Delhi-110002. PAN- AADCA8990P Assessee Revenue Assessee by Shri P.D. Mittal, CA Revenue by Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing 25.11.2025 Date of Pronouncement 18.02.2026 Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 2 ORDER PER BRAJESH KUMAR SINGH, AM, These cross appeals by the Assessee and Revenue are directed against the order dated 23.09.2019 of the Ld. Commissioner of Income Tax (Appeals)-I, New Delhi, [hereinafter referred to as the ‘Ld. CIT(A)’] arising out of the assessment order dated 27.12.2017 passed under 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Dy. Commissioner of Income Tax, Circle-1(1), New Delhi (hereinafter referred to as the ‘Ld. AO’) pertaining to Assessment Year (A.Y.) 2015-16. Both the cross appeals were heard together and disposed of by this common order for the sake of convenience. 2. First, we take up the Revenue’s appeal in ITA No.- 9366/Del/2019. Addition of Rs 2,57,12,620/- on account of sales of trading unit: During the year, the assessee was engaged in the business of trading of iron steel scrap and conversion of steel scrap into steel ingots. The assessee had two units, one at Delhi for trading and the other at Kundli, Haryana for conversion of steel scrap into ingots. The assessee had declared total turnover of Rs. 107,54,19,570/- and net profit before tax of Rs. 42,41,726/- with a N.P. Rate of 0.39%. The AO noted that, if the non-operating income of Rs. 2,40,63,260/-(including interest income of Rs. Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 3 2,36,97,726/-) was excluded from net profit, the assessee had net loss of Rs. 1,98,21,534/- which gives operational profit of (-)1.84%. 2.1 The AO noted that the assessee was into business of purchase, sale and production of steel of four major grades (201, 304, 316, 403) with wide variation in price between these grades. The Assessing Officer further noted that these grades were internationally recognized standards with different composition of metals. During the course of assessment proceedings, the Assessing Officer enquired about the details of sales of steel grade wise by the assessee. The same was submitted by the assessee vide its letter dated 20.11.2017 (which was annexed as Annexure D of the assessment order by the AO). On examination of the same, the Assessing Officer noted the details of month-wise sales of trading unit sales of steel grade wise by the assessee showed quantity of sale of 1,87,090 kg. for grade 316 (after month-wise figures for all months) without including the value of sales of this quantity in the total value of sales. The AO further noted that this quantity was shown at the bottom in quantity column for grade 316 after all months, but no value was shown against this quantity. This was considered by the AO as unaccounted sales for grade 316 for trading unit for quantity of, at least, 1,87,090 kg and in value terms, the cost of this unaccounted sale was determined at Rs. 2,44,88,210/- [@ Rs. 130.89 per kg as computed above at point (v) of Annexure -D]. Further, the AO observed that if estimated G.P. of 5% to this purchase price was added, it showed unaccounted sales Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 4 of Rs. 2,57,12,620/-. Accordingly, an addition of Rs. 2,57,12,620/ was made on account of unaccounted sales of steel of grade 316 in trade unit. 3. Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A). The assessee filed a written submission inter-alia submitting that this figure \"187090\" duly highlighted is the figure representing total of quantitative sales of grade 304 and grade 316 for the month of March only (172640+14450) and not any additional figure. It was further submitted that this figure was not been taken into account in other columns of the chart i.e. total quantity, amount, total amount, etc. and at best the putting of this figure in this column was merely a typographical error and nothing else. The Ld. CIT(A) forwarded the submissions of the assessee to the Assessing Officer and called for a remand report. The Assessing Officer in his Remand Report dated 14.04.2019 after reiterating the findings in the assessment order submitted that once a view has been formed by the Assessing Officer on the issue it cannot be commented by the Assessing Officer by providing the second opinion and submitted that the appeal of the assessee for the year under consideration may kindly be considered on the basis of merits of the submission made by it. The relevant comment of the Assessing Officer in the remand report is reproduced as under: “The copy of note sheet is already submitted by the assessee before the Appellate authority, thus, the contention of the assessee may kindly be considered on the basis of merits of the note sheet placed before you. Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 5 Once a view has been formed by the AO on the issue it cannot be commented upon by AO by providing the second opinion. Thus, keeping in view of the facts of the case and material available on record the appeal of the assessee for the year under consideration may kindly be considered on the basis of merits of the submission made by it.” 3.1 The Ld. CIT(A) deleted the said addition by accepting the plea of the assessee that the sales for grade 316 for trading unit for quantity being 187090 in the Annexure D was a typographical error. The Ld. CIT(A) also took note of the fact that the said chart submitted was prepared by Ms. Kamini Grover, the Accountant of the assessee company and also noted the affidavit filed by her that the figure of 187090 was the total of quantity of sale of grade 304 and 316 in respect of month of March. The relevant extract of her affidavit (placed on page no. 46-47 of the paper book) is reproduced as under: Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 6 Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 7 3.2 The relevant extract of the order of the Ld. CIT(A) is reproduced as under: “5.5 Decision: 5.5.1 At Para 21(vii) of the assessment order the AO has noted that the details of month-wise sales of trading unit submitted by the appellant with its letter dated 20.11.2017 (Annexure D to the assessment order) shows quantity of sale of 1,87,090 kg for grade 316 (after month-wise figures for all months) without including the value of sales of this quantity in the total value of sales. The AO has further noted that this quantity has been shown at the bottom in quantity column for grade 316 after all months, but no value has been shown against this quantity. Accordingly, the AO has concluded that this shows unaccounted sales for grade 316 for trading unit for quantity of, at least, 1,87,090 kg. In value terms, the cost of this unaccounted sales Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 8 comes to Rs. 2,44,88,210/- after the rate of Rs. 130.89 per kg as computed at point (v) of Para 21 of the assessment order. Accordingly, the AO has held that the appellant has been found to have unaccounted sales of at least 1,87,090 kg of steel scrap of grade 316 in the trade unit, the cost of which comes to Rs. 2,44,88,210/-, as computed in Para 21(vii) of the assessment order. The AO further observed that if the estimated G.P. of 5% to this purchase price is added, the total price of unaccounted sales comes to Rs. 2,57,12,620/-. Accordingly, the AO has made an addition of Rs. 2,57,12,620 on account of unaccounted sales of steel of grade 316 in trade unit. 5.5.2 In this regard Ld. AR has stated that the details of month-wise sales of trading unit submitted by the appellant with its letter dated 20.11.2017(Annexure D to the assessment order) shows quantity of sale of 1,87,090 kg for grade 316 (after month- wise figures for all months) without including the value of sales of this quantity in the total value of sales. This quantity has been shown at the bottom in quantity column for grade 316 after all months, but no value has been shown against this quantity. The AO has treated it as unaccounted sales for grade 316 for trading unit for quantity of at least 1,87,090 kg and made an addition of Rs.2,57,12,620 on account of unaccounted sales of, steel of grade 316 in trade unit. In this regard Ld. AR has clarified that this figure 187090\" duly highlighted is the figure representing total of quantitative sales of grade 304 and grade 316 for the month of March only and not any additional figure (172640+14450) Ld. AR has stated that this figure has also not been taken into account in other columns of the chart i.e. total quantity, amount, total amount, etc. Ld. AR has clarified that at best the putting of this figure in this column is merely typographical error and nothing else. 5.5.3 Ld. AR has further clarified that the Annexure 'D' annexed to the assessment order shows month wise sales in terms of quantity of the Delhi office of the appellant company. The Delhi office is engaged in the business as a trader of S.S scrap. No manufacturing activity is undertaken at Delhi office. The statement of sale in the form of Annexure 'D' was submitted with the Ld. A.O. during the assessment proceedings and was prepared on the basis of sales register maintained under the Tally software and form part of books of account of the appellant company. Ld. AR clarified that the software only show the total sold quantity of S.S scrap and does not disclose grade wise sale quantity. In view of the requirement of the Ld. A.O. of grade wise sale quantity details, the appellant company has prepared the same on the basis of sale register after verifying each and every bill. Ld. AR has submitted the print out of month wise sale register from the Tally software showing date, bill No., and quantity sold duly checked and signed by the statutory auditor of the appellant company Ld. AR has stated that the total quantity as per sale register month wise tally with the figures shown in the above-mentioned Annexure 'D' and there is no variation. Ld. AR has also submitted the copy of register known as RG-23-D maintained under Rule 9(4) of Cenvat Credit Rules, 2004 showing purchases of imported goods either directly imported from outside India or purchased from the local dealer being imported by him from outside India on the left hand side of the register. On the right hand side of the register the details of sales of those very goods imported are recorded. In this register the sale is required to be recorded against the each consignment of import notwithstanding the dale wise order of the sale. From the register known as RG-23-D, Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 9 Ld. AR has totalled the quantity of sale on the right hand side and prepared a chart showing page wise total of sold quantity. Ld. AR has stated that the chart prepared from RG-23-D reveals that the total quantity sold during the year is 30,55,749 Kg and this figure also tally with the total of monthly quantitative sale mentioned in the Annexure 'D'. Accordingly, Ld. AR has argued that the figure of \"187090\" does not form part of sale and treating the said figure as part of sale is wholly incorrect Ld. AR has clarified that during the course of assessment proceeding all the above mentioned registers and sale register prepared on the tally software was produced before the Ld. A.O. and nothing new has been relied on. Ld. AR has also raised the technical objections to this addition. Ld. AR has stated that this chart (Annexure D) was submitted before the AO on 20-11-2017 and duly scrutinized by him during the course of hearing running into more than 3 hours and nothing in this regard was inquired into or questioned into either during the course of hearing or in the note sheet of the said date. Ld. AR has further stated that a show cause notice in detail was also raised on 28-11-2017 through order sheet and nothing in this regard was mentioned in the show cause notice. The photocopy of the order sheet of 28-11-2017 (show cause notice) has been also submitted by Ld. AR. Ld. AR has stated that in view of the above facts the addition of R.2.57.12.620/- may be deleted. 5.5.4 In the Remand Report vide letter dated 14.04.2019 the AO has stated the copy of note sheet is already submitted by the appellant before the Appellate authority, thus, the contention of the appellant may be considered on the basis of merits of the note sheet placed before the Appellate authority The AO has also stated that once a view has been formed by her predecessor on the issue it cannot be commented upon by her by providing the second opinion. The AO has also stated that keeping in view of the facts of the case and material available on record the appeal of the appellant for the year under consideration may be considered on the basis of merits of the submission made by it. 5.5.5 I have carefully considered the observation of the AO in the assessment order and also the submission of the appellant company. I have also perused the Tax Audit Report and the Annexure 'D' to the assessment order. The Annexure 'D' shows month wise sales in terms of quantity of the Delhi office of the appellant company. Ld. AR has stated that in view of the specific requirement of the A.O. for grade wise sale quantity detalls, the appellant company has prepared the same on the basis of sale register after verifying the bills. For better visualization of the issue, the Annexure 'D' to the assessment order is reproduced as under: Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 10 During the appellate proceedings Ld. AR has submitted the print out of month wise sale register from the Tally software showing date, bill No., and quantity sold. Ld. AR has stated that the quantity as per sale register tally with the figures shown in the above mentioned Annexure 'D' and there is no variation. Ld. AR has also submitted the copy of register known as RG-23-D maintained under Rule 9(4) of Cenvat Credit Rules, 2004 showing purchases of imported/excisable goods on the left hand side of the register. On the right hand side of the register the details of sales of those goods are recorded. From the register known as RG-23-D. Ld. AR has prepared a chart showing page wise total of sold quantity. The chart prepared from RG-23-D reveals that the total quantity sold during the year is 30,55,749 Kg and this figure also tally with the total of monthly quantitative sale mentioned in the Annexure 'D'. Ld. AR has clarified that during the course of assessment proceeding all the above mentioned registers and sale register prepared on the tally software was produced before the Ld. A.O. Ld. AR has stated that this chart (Annexure D) was submitted before the AO on 20-11-2017 and duly scrutinized by him during the course of hearing running into more than 3 hours and nothing in this regard was inquired into or questioned into either during the course of hearing or in the note sheet of the said date. Ld. AR has further stated that a show cause notice in detail was also raised on 28-11-2017 through order sheet noting and nothing in this regard was mentioned in the said order sheet noting. In the Remand Report vide letter dated 14.04.2019 the AO has stated the copy of note sheet is already submitted by the appellant before the Appellate authority, thus, the contention of the appellant may be considered on the basis of merits of the note sheet placed before the Appellate authority. The present AO has also stated that once a view has been formed by her predecessor on the issue it cannot be commented upon by her by providing the second opinion. It is to be noted that Ms Kamini Grover the Accountant of the appellant company has prepared the chart showing grade wise sale for trading unit which has been made as Annexure 'D' to the assessment order. She has also filed an affidavit stating that she Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 11 has put the figure of 187090 in the column of quantity grade 316 in addition to the monthly figures in the said column without reference to any month. She has also stated that this figure is the total of grade 304 and 316 in respect of month of March She has admitted that it was an error on her part while preparing the details on computer She has also stated that the total quantity sold in respect of grade 316 which has been put at 627638 is also incorrect because of inclusion of the said figure of 187090. This chart (Annexure D) was submitted before the AO on 20-11-2017 and duly scrutinized by him during the course of hearing running into more than 3 hours and nothing in this regard was inquired into or questioned into either during the course of hearing or in the note sheet of the said date. A show cause notice in detail was also raised on 28- 11-2017 through order sheet and nothing in this regard was mentioned in the show cause notice. I have perused the Annexure 'D' to the assessment order which is a chart showing grade wise monthly sale for trading unit. I have also carefully considered the submission of the appellant company and also the remand report submitted by the AO. On perusal of chart showing grade wise sale for trading unit, it is found that the figure of 187090 appears in the column of quantity grade 316 just after the monthly figures in the said column without reference to any month and all other figures in this row are blank. Moreover, this figure of 187090 is the total of figures 172640 and 14450 for grade 304 and 316 respectively for the month of March. After careful examination of Annexure 'D' and the remand report submitted by the AO on this issue, I am of the view that this is a typographical error which has occurred at the time of preparation of the said chart on computer and hence no adverse view can be taken on such typographical error. Accordingly, the addition of Rs 2,57,12,620/- on account of unaccounted sales of steel of grade 316 in trading unit is deleted. Ground No. 1 of the appeal is decided in favour of the appellant.” (emphasis supplied by us) 4. Aggrieved with the said order, the Revenue is in appeal before us, on the following ground of appeal: “ (i) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition of Rs. 2,57,12,620/ made by the AO being month wise unaccounted sales of 316 trading unit for quantity of 1,87,090 Kg. in value terms, the cost of which comes to Rs.2,44,88,210/- and if estimated Gross Profit of 5% to this purchase price is added, it shows unaccounted sales of Rs.2,57,12,620/-. .” 5. At the time of hearing before us, the Ld. Sr. DR supported the assessment order and the ground of appeal. Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 12 6. On the other hand, the Sr. AR supported the order of the Ld. CIT(A) and also filed a short note and the relevant extract of the same are reproduced as under: 1. The AO has made the above addition on account of alleged undisclosed sales vide para 23.1 page 17 of the assessment order. This addition has been made on the basis of the details titled \"Sale Grade wise for trading unit\" submitted by the assessee on 20-11-2017 forming part of assessment order vide Annexure D. 2. Perusal of Annexure D show that there is a figure \"187090\" in the line quantity 316 which represents the total of quantity of sale of March (172640+ 14450) of both the grades. However, the L.A.O has assumed the said figure the undisclosed sales. 3. After submission of this statement on 20-11-2017 the LA.O has issued show cause notice on the order sheet dt. 28-11-2017. The copy of the order sheet alongwith typed copy is submitted before your good self vide page 42-45 of the paper book. No query was raised in this show cause notice regarding the figure under reference. 4. The assessee is maintaining day to day stock register as required under Excise Rules being a registered dealer under the Excise Act. The said Excise register was produced before the LAO in the course of assessment proceedings for examination by the L.A. O Observations made by the L.CIT (A) 5. The LCIT(A) has discussed the above issue on page 9-14 of his order vide para 5.5.1 to 5.5.5 of the Appeal order and examined the Excise records for verification. Also obtained the copy of the entire Excise Record and kept in the record. An affidavit of the Accountant of the assessee admitting the typographical error dt.16-09-2019 was also submitted before the L. CIT(A) and available at page 46-47 of our paperbook submitted with your good sell 6. The LCIT(A) has held \"After careful examination of Annexure 'D' and the remand report submitted by the AO on this issue, I am of the view that this is a typographical error which has occurred at the time of preparation of the said chart on computer and hence no adverse view can be taken on such typographical error. Accordingly, the addition of Rs.2,57,12,620/-on account of unaccounted sales of steel of grade 316 in trading unit is deleted. Ground No.1 of the appeal is decided in favour of the appellant\". 7. We have heard both the parties and perused the material available on record. We have carefully examined the fact as stated by the Assessing Officer in the assessment order particularly Annexure D of the assessment order and the order of the Ld. CIT(A). Upon its perusal, we are satisfied that the claim of the assessee that Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 13 the figure of “187097” was a typo error on the basis of which no addition could be made. The Ld. CIT(A) after a detailed examination of the fact as reproduced above and duly highlighted by us has deleted the addition. The revenue has not able to show any infirmity in the findings of the Ld. CIT(A) on this issue. We, therefore, see no reason to interfere with the findings of the Ld. CIT(A), and the same are upheld. Ground no. 1 of the appeal is dismissed. Addition of Rs. 3,29,40,438/- on account of unaccounted sales of the manufacturing unit 8. The Assessing Officer upon examination on various details filed by the assessee noted that there was a discrepancy in the figures in the income tax return and tax audit report for quantity purchased / sold / consumed / manufactured. The Assessing Officer further noted that there was also a variation in the figures of quantity of opening stocks, purchases consumption and sales of raw materials for manufactured unit between quantity shown in the income tax return and the quantity shown in the tax audit report. On the basis of these discrepancies the Assessing Officer noted that in the manufacturing unit the yield was 91.09% only as against the claim its 95.23% in the tax audit report. The AO noted that it proved unaccounted sales in the manufacturing unit also and if Assessee’s own claim of e normal 95% was accepted, then it implied that 3.91% (95% -91.09%) of manufacturing unit was sold outside the books of accounts. In value terms the AO computed the value of the Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 14 said unaccounted sets at Rs. 3,29,40,438/-) (Total manufacturing sets Rs. 76,74,02,680/- x 3.91/91.09) Accordingly, the Assessing Officer calculated a sum of Rs. 3,29,40,438/- as unaccounted sales. The relevant extract of the order of the Assessing Officer is reproduced as under: “A consolidated analysis of quantity of raw material purchased and consumed in manufacture unit (grade wise analysis is not possible in absence of grade-wise segregation of opening stock) shows yield of 91.09% only against claim of 95.23% in tax audit report, which has been finally claimed to be correct, as under: Opening Stock of raw material 4,66,044 Tax Audit Report, finally claimed to be giving correct figure (reproduced at para 7 above) Add, Purchase of raw material 72,96,722 Tax Audit Report, finally claimed to be giving correct figures (reproduced at paa 7 abvoe) Add, transfer of raw material in from trade unit 3,27,670 76,24,392 Figure submitted with assessee’s letter dated 20.11.2017- Annex. D to this order 80,90,436 Less, Sale of scrap 4,09,995 Tax Aduit report, finally claimed to be giving correct figures (reproduced at para 7 above) Less, closing stock of scrap 1,52,501 5,62,49 Tax Aduit report, finally claimed to be giving correct figures Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 15 (reproduced at para 7 above) Consumption of Raw Material (Balance Figure) 75,27,940 Balance Figure Production of final product 68,57,400 Tax Aduit report, finally claimed to be giving correct figures *(reproduced at para 7 above) Yield (6857400/7527940) 91.09% Thus, the yield for manufacture unit has been found to be 91.09% as against its claim of 95.23% in the tax audit report which has been finally claimed to be giving correct figure. This yield of 91.09% is much less than the claim of 95%, purportedly, substantiated by the assessee in letter dated 11.12.2017 (refer para 20.6 above). It proves unaccounted sales in manufacture unit too. If the assessee's own claim of a normal 95% yield is accepted, it implies that 3.91% (95% -91.09%) of manufacture stock is being sold outside the books of account. In value terms, this unaccounted sales comes to Rs. 3,29,40,438/- (Total manufacture sales Rs. 76,74,02,680 x 3.91/91.09). 9. Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A). 9.1 The AR of the assessee filed a written submission before the Ld. CIT(A) and the relevant facts stated by the assessee before the Ld. CIT(A) are reproduced as under: “ The figures adopted by Ld. A.O in the table mentioned in pare 21 (viii) are the figures given by the assessee company in its Tax Audit Report (refer page No 24 of this paper book) except transfer to raw material in from trade unit 3,27,670 Kg. All these above figures mentioned in the table has been computed on the basis of the statutory record of the assessee company le. RG 23D. Perusal of this statutory record clearly show that there is only one column for purchases and also for transfer of goods received. Further the table provided in the Tax Audit Report also has only one column for mentioning the purchase quantity as well as transfer of goods received Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 16 quantity. There is no separate column for transfer received either in the statutory record or in the table provided in the Tax Audit Report In view of these facts the assessee company has filled the figure of purchases after including the figure of transfer of goods received quantity. Thus the figure of purchase of raw material shown in the table being 72,96,722 Kg. represent the figure of purchase as well as transfer of goods received quantity. That the Ld. A.O. has adopted the above figure of 72,96,722 Kg which is inclusive of transfer of goods received quantity, being 3,27,670 Kg and has again added this figure of 3,27,670 Kg. again. This has resulted the duplication of the said figure ie. 3,27,670 Kg. That in case the above duplication is deleted the yield comes to 95.23% (6857400/7200270). This yield is not only justified but little higher than as expected by the Ld. A.O. i.e. 95%. 9.2 The Ld. CIT(A) forwarded the submissions of the assessee to the Assessing Officer and called for a remand report. The relevant comment of the Assessing Officer in the remand report is reproduced as under: “The copy of note sheet is already submitted by the assessee before the Appellate authority, thus, the contention of the assessee may kindly be considered on the basis of merits of the note sheet placed before you. Once a view has been formed by the AO on the issue it cannot be commented upon by AO by providing the second opinion. Thus, keeping in view of the facts of the case and material available on record the appeal of the assessee for the year under consideration may kindly be considered on the basis of merits of the submission made by it.” 9.3 The Ld. CIT(A) deleted the said addition, agreeing with the submission of the assessee. The Ld. CIT(A) noted that in the table at page number 16 of the assessment order the A.O. had taken the figure of 72,96,722 Kg which was inclusive of transfer Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 17 of raw materials 3,27,670 Kg from trading unit in Delhi and had again added this figure of 3,27,670 Kg on account of transfer of raw materials from trading unit in Delhi which resulted in the duplication of the said figure i.e. 3,27,670 Kg. and if the above duplication was removed, total consumption of raw materials came to 72,00,270 Kg. which resulted in yield at the manufacturing unit at Kundli at 95.23% (6857400 100/7200270), which was higher than the benchmark of 95% as fixed by the AO. The relevant extract of the order of the Ld. CIT(A) is reproduced as under: “ 6.5.1 In the assessment order the AO has observed that a consolidated analysis of quantity of raw material purchased and consumed in manufacture unit shows yield of 91.09% only against claim of 95.23% in tax audit report, which has been finally claimed to be correct. The AO has made the analysis quantity of raw material purchased and consumed in manufacture unit at page number 16 of the assessment order as under: Source of information Opening stock of raw material 4,66,044 Tax Audit Report, finally claimed to be giving correct figures (reproduced at para 7 above) Add, Purchase of raw material 72,96,722 Tax Audit Report, finally claimed to be giving correct figures (reproduced at para 7 above) Add, transfer of raw material in from trade unit 3,27,670 76,24,392 Figure submitted with assessee's letter dated 20.11.2017- Annex Do this order 80,90,436 Less, sale of scrap 4,09,995 Tax Audit Report, finally claimed to be giving correct figures (reproduced at para 7 above) Less, closing stock of scrap 1,52,501 5,62,496 Tax Audit Report, finally claimed to be giving correct figures (reproduced at para 7 above) Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 18 Consumption of raw material (Balance figure) 75.27,940 Balance figure Production of final product (steel ingot) 68,57,400 Tax Audit Report, finally claimed be giving correct (figures reproduced at para 7 above) Yield (6857400- 7527940) 91.09% The AO found the yield for manufacture unit to be 91.09% as against its claim of 95.23% in the Tax Audit Report. In the assessment order the AO observed that this yield of 91.09% is much less than the claim of 95%, purportedly, substantiated by the appellant in letter dated 11.12.2017. Accordingly, the AO concluded that it proves unaccounted sales in manufacture unit too. In the assessment order the AO has further observed that if the appellant's own claim of a normal 95% yield is accepted, It implies that 3.91% (95% - 91.09%) of manufacturing stock is being sold outside the books of account and in value terms, this unaccounted sales comes to Rs.3,29,40,438/- (total manufacture sales Rs. 76,74,02,680 x 3.91/91.09). The AO has made an addition of Rs.3,29,40,438/- on account of unaccounted sales of manufacture unit. 6.5.2 in this regard Ld AR has stated that the figures adopted by A.O in the table mentioned in para 21 (viii) are the figures given by the appellant company in its Tax Audit Report except transfer to raw material from the trading unit amounting to 3.27.670 Kg. Ld. AR has stated that all these figures mentioned in the table has been computed on the basis of the statutory record of the appellant company i.e. RG 23D. Perusal of this statutory record clearly show that there is only one column for purchases and also for transfer of goods received Further the table provided at item number 35(bA) in the Tax Audit Report for raw materials also has only one column with heading \"purchases during the previous year\" for mentioning the purchase of goods as well as goods received on transfer. There is no separate column for quantity of goods received on transfer either in the statutory record or in the table provided in the Tax Audit Report. In view of these facts the appellant company has filled the figure of purchases after including the figure of transfer of goods at the table at item number 35(bA) in the Tax Audit Report. Ld. AR has stated that the figure of purchase of raw material shown in the table being 72,96,722 Kg. represent the figure of purchase as well as transfer of goods received quantity. Ld. AR has stated that the A.O. has adopted the above figure of 72,96,722 Kg which is inclusive of transfer of goods received quantity, being 3,27,670 Kg and has again added this figure of 3,27,670 Kg. This has resulted the duplication of the said figure i.e. 3,27,670 Kg. Ld. AR has stated that in case the above duplication is deleted the yield comes to 95.23% (6857400/7200270) This yield is not only justified but little higher than as expected by the A.O. i.e. 95%. This issue relates to the Kundli office where manufacturing activities ie. Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 19 conversion of S.S scrap into ingot is carried out. Ld. AR has also submitted the printout of the purchase & sale register of the Kundli office maintained in the tally software showing date wise purchase and sale in terms of quantity. Ld. AR has also submitted a chart of monthly purchase as well as goods received by way of transfer from Delhi office. The total for the year is 72,96,722 Kg which includes (1) purchase of 69.69.062kg and (ii) transfer of goods amounting to 327670 Kg from Delhi. Ld. AR has clarified that the figure of 72,96,722 Kg is appearing against item number 35(bA) under the head \"Raw Materials\" of the Tax Audit Report in the column with heading \"purchase during the previous year\". Ld. AR has stated that in the tax audit report there is no separate column where goods received otherwise than purchase can be entered and that is why the goods received by way of transfer from Delhi office was included under this column. Ld. AR has stated that the Kundli office of the appellant company is also maintaining excise record known as Form- IV Register, wherein opening stock of the day, quantity received during the day, quantity consumed during the day, quantity wasted in the production of the day, closing stock of the day, quantity produced during the day are recorded The appellant company has submitted a chart showing month-wise goods received during the year at Kundli. Ld. AR has stated that as per this chart the total quantity of goods received during the year at Kundli is 72,96,722 Kg. which tallies with the figure given at item No. 35(bA) under the head \"Raw Materials of the Tax Audit Report in the column purchase during the previous year. In this regard Ld. AR has raised the technical objection that the issue of alleged lower yield was not raised either on 20.11.2017 or subsequently on 28.11.2017. Ld. AR has stated that the information adopted in the above table was very much available in the Tax Audit Report at the time of commencement of assessment proceedings and the segregation of sale quantity wherein transfer of goods from trading unit to manufacturing unit was submitted before the AO on 20-11-2017 and duly scrutinized by the AO during the course of hearing running into more than 3 hours and nothing in this regard was enquired into or questioned into either during the course of hearing or in the note sheet of the said date. Ld. AR has also stated that a show cause notice in detail was also raised vide order sheet noting dated 28-11-2017 and nothing in this regard was mentioned in the show cause notice. In the remand report the present AO has reported that once a view has been formed by the issue on the issue it cannot be commented upon by her by providing the second opinion. The AO has reported that keeping in view of the facts of the case and material available on record the appeal of the appellant for the year under consideration may be considered on the basis of merits of the submission made by it. I have carefully considered the observation of the AO in the assessment order and the submission of the appellant company. Total quantity received as per excise record known as Form- IV Register including purchase and branch transfer at Kundli is 72,96,722 Kg. which tallies with the figure given at item No. 35(bA) under the head Raw Materials of the Tax Audit Report in the column \"purchase during the previous year. As per the purchase & sale register of the Kundli office the total purchase including transfer from Delhi office for the year is 72,96,722 Kg which includes (1) purchase of 69,69,052 kg and (ii) transfer of goods amounting to 3,27,670 Kg from trading unit in Delhi. The same figure of 72,96,722 Kg is appearing against item No. 35(bA) under the head 'Raw Materials of the Tax Audit Report in the column \"purchase during the previous year' Thus the figure of 72,96,722 Kg appearing against item No. 35(bA) under the head \"Raw Materials\" of the Tax Audit Report tallies with the figure of purchase amounting to 72.96,722 Kg at Kundli which Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 20 includes (i) purchase of 6969052 kg and (ii) branch transfer of goods amounting to 3,27,670 Kg from Delhi. It also tallies with the figure of transfer of goods amounting to 3,27,670 Kg from Delhi as appearing in Annexure 'D' to the assessment order. In the table at page number 16 of the assessment order the A.O. has taken the figure of 72,96,722 Kg which is inclusive of transfer of raw materials 3,27,670 Kg from trading unit in Delhi and has again added this figure of 3,27,670 Kg on account of transfer of raw materials from trading unit in Delhi. This has resulted the duplication of the said figure ie. 3,27,670 Kg. If the above duplication is removed, total consumption of raw materials come to 72,00,270 Kg. Thus the yield of the manufacturing unit at Kundli is computed at 95.23% (6857400 100/7200270). This yield is higher than the benchmark of 95% as fixed by the AO. Considering the facts of the case as discussed above and the remand report submitted by the AO, I am of the view that the AO is not justified in making the addition of Rs. 3,29,40,438/- on account of unaccounted sales of manufacturing unit which was arrived at on the basis of lower yield at the manufacturing unit at Kundli. In view of it, the AO is directed to delete the addition of Rs. 3,29,40,438/- made on account of unaccounted sales of manufacturing unit. Ground No. 2 of the appeal is decided in favour of the appellant. (emphasis supplied by us) 10. Aggrieved with the said order, the Revenue is in appeal before us, on the following ground of appeal: “ (ii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition of Rs. 3,29,40,438/- made by the AO being unaccounted sales of manufacturing unit based on a consolidated analysis of quantity of raw material purchased and consumed shown in report implies that 3.91% (95% 91.09%) of manufactured stock was sold outside the books of account. 11. At the time of hearing before us, the Ld. Sr. DR supported the assessment order and the grounds of appeal. 12. On the other hand, the Sr. AR supported the order of the Ld. CIT(A) and also filed a short note and the relevant extract of the same are reproduced as under: II. Addition of Rs.32940438 Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 21 1. The Ld. A.O has made this addition vide para 23.2 on page 17 read with para 21(VIII) on page 16 of the assessment order on account of unaccounted sales. These unaccounted sales have been computed on the basis of low yield of the raw material consumed. The low yield has been computed on the basis of the figures submitted in the Tax Audit Report dt. 03-09-2015 vide item no. 35 bA available on page 30 of the paper book submitted with your good self. 2. That as per the figures submitted in the Tax Audit Report in respect of raw material the yield is 95.23%. However, the figure of yield has been computed at 91.09% by the L.A.O as per the figures mentioned on page 16 of the assessment order. 3. Perusal of the figures mentioned of page 16, the L.A.O has adopted all the figures as per Tax Audit Report and added one more figure Add transfer of raw material in from trade unit being 327670 kg\". As a result of this additional figure the yield has gone down. 4. This additional figure is in fact included in the figure of purchases of raw material 7296722. It may be added here that there is no column in the Tax Audit Report to show the transfer of raw material as in the present case, hence, the same was included in the purchases. 5. That the L.A.O has not raised this issue in any show cause notice. The copy of the show cause notice dt. 07-11-2017 available on pg. 38-41 of the paper book, and also copy of the order sheet dt. 28-11-2017 available on page 42-45 of the paper book submitted with your good self. Observations made by the Ld.CIT (A) 6. The L.CIT(A) has discussed this issue vide para 6.5 on page 23-27 of the Appeal order. The L.CIT(A) has also examined the relevant Excise Record popularly known as Form IV register. and found that the figure of 7296722 kg includes the figure of branch transfer of goods being 327670 kg. It may be added here that these Excise Records was also produced before the L.A.O in the course of assessment proceedings. 6. That in case this additional figure of 327670 kg is omitted the average yield comes to 95.23% and not 91.09%. 7. That on the basis of the examination of the Excise Records the L.CIT(A) has held\" Considering the facts of the case as discussed above and the remand report submitted by the AO, I am of the view that the AO is not justified in making the addition of Rs.3,29,40,438/-on account of unaccounted sales of manufacturing unit which was arrived at on the basis of lower yield at the manufacturing unit at Kundli. In view of it, the AO is directed to delete the addition of Rs. 3,29,40,438/-made on account of unaccounted sales of manufacturing unit. Ground No.2 of the appeal is decided in favour of the appellant.\" Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 22 13. We have heard both the parties and perused the material available on record. The Ld. CIT(A) for the reasons as given in para no. 6.5.2 of his order as reproduced above and duly highlighted by us deleted the said addition. In doing so, the Ld. CIT(A) considered the excise record known as Form no. IV Register and noted that in the table at page number 16 of the assessment order the A.O. had taken the figure of 72,96,722 Kg which was inclusive of transfer of raw materials 3,27,670 Kg from trading unit in Delhi and had again added this figure of 3,27,670 Kg on account of transfer of raw materials from trading unit in Delhi, which had resulted the duplication of the said figure i.e. 3,27,670 Kg. The Ld. CIT(A) further observed that if the above duplication was removed, total consumption of raw materials comes to 72,00,270 Kg resulting in yield of the manufacturing unit at Kundli at 95.23% (6857400 100/7200270) which was higher than 95% determined by the AO. In view of these facts as discussed by the Ld. CIT (A) and after considering the remand report submitted by the AO, the Ld. CIT(A) held that the AO was not justified in making the addition of Rs. 3,29,40,438/- on account of unaccounted sales of manufacturing unit which was arrived at on the basis of lower yield at the manufacturing unit at Kundli, and deleted the same. Thus, it is seen that the Ld. CIT(A) after a detailed examination of the facts has deleted the addition. The revenue has not able to show any infirmity in the findings of the Ld. CIT(A) on this issue. We, therefore, see no Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 23 reason to interfere with the findings of the Ld. CIT(A), and the same are upheld. Ground no. 2 of the appeal is dismissed. Addition of Rs. 1,07,54,196/- on account of estimate basis 14. In view of the various defects noted by the Assessing Officer in the books of accounts during the course of assessment proceedings, the assessee was asked, during the course of hearing on 28.11.2017, to explain as to why assessment u/s 144 as per the provisions of section 144 read with section 145(3) of the I. T. Act, 1961, not be made in the case. The relevant discussion in the assessment order is reproduced as under: “19. Taking into account the above facts, the assessee was asked, during the course of hearing on 28.11.2017, to explain as to why assessment u/s 144 as per the provisions of section 144 read with section 145(3) of the 1. T. Act, 1961, not be made in the case. The note sheet dated 28.11.2017, duly signed by the A.R. of the assessee, records as under: \"The following facts, inter alia, have been noticed in the details produced so far: i) The sales bills of manufacturing unit do not show the grade of steel sold although there are specific grades of steel produced by the assessee and there are specific grades of steel in the industry. So, verification of opening stock, purchases, sale and closing stock cannot be done ii) No satisfactory answer has been provided to query No. 15 and 17 of the questionnaires dated 7.11.2017. iii) The income tax return (Part A-QD) does not show any sale of Raw Material. However, the details filed on 3.10.2017show sale of Raw Material (scrap) of 673009 kg. As against this, the tax audit report in form 3CD [Column 35bA] shows sale of scrap of 409995 kg. iv) There is no gradewise segregation of goods transferred from Trading Unit to Manufacture Unit. So again, verification of purchase, sale, consumption, etc. is not possible. Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 24 The above facts show that the accounts of the assessee are incorrect and incomplete. Therefore, the assessee is hereby given an opportunity to explain as to why assessment u/s 144 as per the provisions of Sec. 144 read with Section 145(3) of the I. T. Act, 1961 not be made in the case.\" It may be mentioned here that in point no. (ii) above, query no. 15 (of questionnaire dated 07.11.2017) related to the discrepancy mentioned in para 11 above. Query no. 17 related to discrepancy between the income tax return and the tax audit report in the figures of quantities of purchases, consumption, sales and percentage of yield. The assessee was given an opportunity to explain as to why assessment u/s 144 as per the provisions of Sec. 144 read with Section 145(3) of the I. T. Act, 1961 not be made in the case on 28.11.2017.” 20. In response to the above, the assessee filed a letter dated 11.12.2017. ………………….xxx……………… 21. I have considered the submissions of the assessee. Serious discrepancies have been noticed in the details submitted by the assessee which have remained unexplained. Since these details have purportedly emanated from the books of account of the assessee, the books of account of the assessee are highly unreliable. Following discrepancies have been noticed which have remained unexplained: (i) The figures of purchases, consumption and sales of raw material of manufacture unit given in the income tax return are wrong which has been admitted by the assessee. This has also not been properly explained by the assessee, as discussed in para 20.3 and 20.4 above. (ii) The figures of sales of scrap of manufacture unit finally given in the letter dated 13.12.2017 are also highly unreliable in view of facts mentioned in para 20.4 above. (iii) The assessee admitted during the course of hearing on 20.11.2017 that grade-wise details of sales of manufacture unit are not maintained. This is a serious deficiency in the books of account of the assessee because in the absence of the same, it is not possible for the assessing officer to verify the trading results of the assessee. (iv) The assessee has not submitted grade-wise details of opening stock of manufacture unit till end. (v) If the figures of grade-wise segregation of transfer of stock from trading unit to manufacture unit, given in the assessee's letter dated 13.12.2017 are taken into consideration, it points to another serious discrepancy in the stock results of trading unit as under: Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 25 In the details submitted by the assessee and consequently, in the books of account of the assessee. If the average purchase price of Rs. 130.89 per kg. for grade 316, as per the details submitted by the assessee (Annexure F to this order Rs. 3,84,55,847 for 2,93,811 kg) is considered, it gives figure of negative stock of as much as Rs. 3,68,38,598/-. It shows a serious manipulation of books of account by the assessee. Even the figures of closing stock of other grades, as computed above, do not match with the figures given by the assessee. (vi) A similar analysis, as made above, could not be made for manufacture unit because the assessee failed to provide grade-wise bifurcation of opening stock of manufacture unit. (vii) The details of month-wise sales of trading unit submitted by the assessee with its letter dated 20.11.2017 (Annexure D to this order) shows quantity of sale of 1,87,090 kg. for grade 316 (after month-wise figures for all months) without including the value of sales of this quantity in the total value of sales. This quantity has been shown at the bottom in quantity column for grade 316 after all months, but no value has been shown against this quantity. This shows unaccounted sales for grade 316 for trading unit for quantity of, at least, 1,87,090 kg. In value terms, the cost of this unaccounted sales comes to Rs. 2,44,88,210/- [@ Rs. 130.89 per kg as computed above at point (v)]. A consolidated analysis of quantity of raw material purchased and consumed in manufacture unit (grade wise analysis is not possible in absence of grade-wise Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 26 segregation of opening stock) shows yield of 91.09% only against claim of 95.23% in tax audit report, which has been finally claimed to be correct, as under: Thus, the yield for manufacture unit has been found to be 91.09% as against its claim of 95.23% in the tax audit report which has been finally claimed to be giving correct figure. This yield of 91.09% is much less than the claim of 95%, purportedly, substantiated by the assessee in letter dated 11.12.2017 (refer para 20.6 above). It proves unaccounted sales in manufacture unit too. If the assessee's own claim of a normal 95% yield is accepted, it implies that 3.91% (95% -91.09%) of manufacture stock is being sold outside the books of account. In value terms, this unaccounted sales comes to Rs. 3,29,40,438/- (Total manufacture sales Rs. 76,74,02,680 x 3.91/91.09). 23.3 Since the books of account of the assessee are not reliable, there is a strong possibility that the assessee has not declared its true income from trading and manufacture unit. Therefore, an addition of 1% of total sales declared by it is hereby made, which comes to Rs. 1,07,54,196/-(1% of Rs. 107,54,19,579/-), to cover other discrepancies in the books of account. 14.1 Thus it is seen that in view of the various discrepancies noted by the AO the AO observed that since the books of account of the assessee were not reliable, there was a strong possibility that the assessee had not declared its true income from Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 27 trading and manufacture unit. The Assessing Officer accordingly made an addition of 1% of total sales declared by amounting to Rs. 1,07,54,196/-(1% of Rs. 107,54,19,579/-), to cover other discrepancies in the books of account. 15. Aggrievd with the said order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A), in view of the facts stated in his order restricted the said addition at Rs. 59,14,807/- restricting the said estimation of income at 0.55% of the total sales instead of 1% as adopted by the Assessing Officer and allowed a relief of Rs. 48,39,389/-. The relevant findings of the Ld. CIT(A) are reproduced as under: “ I have carefully considered the observation of the AO in the assessment order, the submission of the appellant company, the remand report submitted by the AO and the rejoinder submitted by the appellant company. The reconciliation statement for the grade 304 & 316 submitted vide written submission dated 29/08/2019 was forwarded to the AO on 29.08.2019 for his comments thereon to be submitted by 09/09/2019. A reminder was issued to the AO on 13.09.2019. However, the AO has not submitted any comment on the reconciliation statement for the grade 304 & 316. In this regard, I have perused Bill of entry No. 7988791 dated 14-01-2015, Bill of entry No 7987839 dated 14-01-2015. Bill of entry No. 6554043 dated 26-08-2014, Bill of entry No. 5162522 dated 20-01-2015 for Rs.5,16,473/- & Bill of entry No. 7987839 dated 14-01-2015 In first two bills of entry, Indian Customs authority has recorded the description of maternal imported as \"Stainless Steel Scrap Grade 304/316\". In other three bills of entry, Indian Customs authority has recorded the description of material imported as 'Stainless Steel Scrap Grade EN 36 with 5% carbide\". There is merit in the submission of the appellant that some of the imported scraps are mixed. In its written submission dated 29/08/2019, the appellant has treated 12110 kg of aluminium as part of closing stock of grade 304. On perusal of the details it is found that in respect of (1) bill of entry no. 8460332 dated 10.03.2019 weight 1,01,210 Kg & (2) bill of entry no. 8641149 dated 18.03.2015 weight 1,00,120 Kg, these two bills of entry have two parts: 95100 kg of grade 304@ Rs 1344 per ton & 6110 kg of aluminium @ Rs 1345 per ton in bill of entry no. 8460332 and 94100 kg of grade 304 @ Rs 1340 per ton & 6000 kg of aluminium@ Rs 1374 per ton in bill of entry no. 8641149. Ld. AR has stated that since stainless scrap of grade 304 and aluminium scrap have been imported at almost same rates, these items have been clubbed under the category \"304\" for the purpose of valuation of stocks. During the course of the appellate proceedings, Ld. AR has explained that the appellant company is engaged in the business of scrap dealer as well as manufacturing of steel ingots by way of melting steel scrap/conversion of steel scrap and in its business it has to purchase steel scrap in whatever grade available in the market even no grade steel scrap. After the purchase the Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 28 steel scrap is classified into grade so that maximum realizable value is achieved. In case the steel scrap does not match with the requirement of the purchaser, the appellant converts the sale into the steel ingot as per requirement of the purchaser by mixing alloys. Ld. AR has also stated that the appellant company is registered under the DVAT Act, as well as Central Excise & Custom Act, read with Rules, and is complying with all the statutory requirements under these Acts. The appellant company is maintaining following records as per the Central Excise Rules: R.G. 23D, R.G. 23A Part-1, RG-1 and Form IV Register. Ld. AR has also stated that the most of sales of the appellant is made to a single party, viz. Jindal Stainless Limited and the majority of purchase is made by way of imports from outside India. On perusal of the details, it is found that the appellant company has properly maintained the above records. However, there are discrepancies relating to proper classification of scraps into grades, sale of scraps in the manufacturing unit and valuation of local scraps in the case of the appellant company. These defects have been identified by the AO in the assessment order. There are also problems with the appellant company in extracting the data and presenting the information correctly before the AO. There are also various discrepancies in different figures between Tax Audit Report and Income tax Return. The appellant company has admitted before the AO that the figures mentioned in Tax Audit Report are correct. However, the adverse observations made by the AO in the assessment order cannot be ignored. The AO has made an estimated addition of Rs. 1,07,54,196/- being 1% of total sales to cover discrepancies in its books of account After considering various submissions of the appellant company and the reconciliation statement in respect of grade 304 & 316 filed vide the written submission dated 29.08.2019, I am of the view that it would be proper and sufficient to restrict the addition to Rs 59,14,807/-, being 0.55 % of total sales instead of Rs. 1,07,54,196/- to cover up various discrepancies in its books of account. Accordingly, the addition on this account is restricted to Rs. 59,14,807/- and the appellant gets a relief of Rs. 48,39,389/-. Ground nos. 3 and 4 are partly allowed. (emphasis supplied by us) 16. Aggrieved with the said order, allowing a relief to the extent of Rs. 48,39,389/- to the Assessee, the Revenue is in appeal before us, on the following ground of appeal: “(iii) Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in restricting the addition of Rs. 1,07,54,196/- to Rs. 59,14,807/- made by the AO on estimation bases of total sales as the books of account of the assessee are not reliable.” Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 29 17. At the time of hearing before us, the Ld. Sr. DR supported the assessment order and the grounds of appeal. 18. On the other hand, the Sr. AR supported the order of the Ld. CIT(A) and also filed a short note and the relevant extract of the same are reproduced as under: 1 The L.A.O has made this addition vide para 23.3 on page 17 of the assessment order on the ground that the books of account of the assessee are not reliable, hence 1% of the total sales is added being income of the assessee. 2. That the L.A.O has not been able to point out any error even for name sake in the books of account maintained by the assessee, inspite of lengthy assessment proceedings. The errors pointed out represents the alleged errors while preparing the various details submitted. Furthermore, it was categorically submitted and established also that the assessee is not maintaining stock register for Grade wise Steel separately because (1) there is no such bifurcation available in respect of opening stock (II) even purchase vouchers do not disclose Grade wise Steel as evident from the specimen copies of the purchase invoices available at page 73-93 of the paper book submitted with your good self. (III) Assessee being a Kabadi Dealer, the trading results has been accepted in the past without exception as shown in the G.P and N.P chart for last 10 years available at page 33 of the paper book submitted with your good self. (IV) In the last scrutiny assessment completed in respect of assessment year 2006-2007 the trading results was accepted and the copy of the assessment order, appeal order (on disallowance of expense) and order of the LI.T.A.T available at page 95-105 of the paper book submitted with your good self. Observations made by the Ld. CIT (A) 3. The L.C.I.T (A) has made observations in this regard vide para 7.6.5 on page 65 of the appeal order. After, discussing the various related facts in this regard in this para the L.CIT(A) has allowed this issue in favour of the assessee in part. The addition had been reduced from 1% of the total sales to .55% of the total sales resulting an addition of Rs, 5914807 as against the addition made by the L.A.O of Rs 10754196. 4. The Ld. CIT(A) has failed to appreciate (1) that the business of the assessee is such where the possibility of maintaining books of account showing Grade wise steel separately is practically impossible. (II) Accepted past history of the trading results (III) even the L.CIT(A) has examined the books of account and has failed to point out any error in the said books of account. Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 30 5. It is prayed that the trading results for the period under reference may kindly be accepted and addition made of Rs.5914807 may kindly be deleted.” (emphasis supplied by us) 19. We have heard both the parties and perused the material available on record. The Ld. CIT(A) restricted the addition @ 0.55% of the total sales as against 1% of the total sales made by the Assessing Officer mainly on the ground that there were certain issues relating to the presentation of the accounts as highlighted above in the order of the Ld. CIT(A) as reproduced above and, therefore, the adverse observations made by the AO in the assessment order cannot be ignored. However, there is a merit in the contention of the assessee that the business of the assessee is such where the possibility of maintaining books of account showing Grade wise steel separately was practically impossible and the Department had accepted past history of the trading results and more importantly the Ld. CIT(A) had examined the books of account but did not point out any error in the said books of account. We have also carefully examined the findings of the Ld. CIT(A) and also note that the defects as pointed out by the Assessing Officer as well as the Ld. CIT(A) relate only to presentation of the accounts and not to any detection of any evasion or suppression of income. Therefore, we affirm the order of the Ld. CIT(A) in deleting the addition to the extent of Rs. 48,39,389/-. Ground no. 3 of the appeal is dismissed. 20 In the result, appeal of the Revenue is dismissed. Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 31 ITA No. 9399/Del/2019 (Assessee’s appeal) 21. The assessee is in appeal on the following grounds of appeal: “ 1. That the Ld. A.O. as well as Ld. CIT (Appeal) gravely erred in upholding the addition of Rs.59,14,807/- in spite of the fact (i) that the trading results was accepted in the past without exception. 2. That the Ld. A.O. as well as Ld. CIT (Appeal) has failed to appreciate that quantitative tally of grade wise steel scrap is not possible on the facts of the case. 3. That the Ld. A.O. as well as Ld. CIT (Appeal) has failed appreciate that the quantitative stock register maintained by the assessee company is in conformity to the annual financials. “ 22. As discussed above in ground no. 3, the Ld. CIT (A) had sustained addition of Rs. 59,14,807/- in respect of estimated disallowance made by the Assessing Officer amounting to Rs. 1,07,54,196/- against which the assessee is in appeal on the above grounds. On careful examination the findings of the Ld. CIT(A) and of the Assessing Officer and as discussed above in para no. 19 earlier in this order, the defects pointed out by them relate only to presentation of the accounts and do not indicate detection of any evasion or suppression of income. Therefore, we are of the considered view that the addition of Rs. 59,14,807/- sustained by the Ld. CIT(A) is not justified and the same is deleted. Ground nos. 1 to 3 are allowed. 23. In the result, appeal of the assessee is allowed. Printed from counselvise.com ITA No.- 9399 & 9366/Del/2019 A.R. Alloys Pvt. Ltd. 32 24. To sum up, appeal of the Revenue in ITA No. 9366/Del/2019 is dismissed and the appeal of the assessee in ITA No. 9399/Del/2019 is allowed. Order pronounced in the open court on 18th February, 2026. Sd/- Sd/- [PAWAN SINGH] [BRAJESH KUMAR SINGH] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated- 18.02.2026. Pooja. Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi, Printed from counselvise.com "